By Christina Toh-Pantin
HANOI, Sept 20 (Reuters) - Hanoi's Thai Phien street, the hub of Japanese motorcycle dealerships in the bustling capital city, has gone uncommonly quiet these days.
Ever since a sudden government import quota on motorcycle parts halted production at dominant foreign assembler Honda and threatened to idle output at Yamaha and Suzuki , prices of popular Japanese makes have surged as much as 40 percent.
That's becalmed the usually brisk business of selling motorbikes, the main mode of transport in the city. "Customers will stand back and wait for the fever to cool," said a shop manager. About nine million bikes are in use throughout Vietnam.
Customers and bike-makers haven't been the only losers.
Analysts say the unexpected curbs send a negative signal on foreign investment and reawaken concerns about transparency and regulation in Communist-ruled Vietnam, which is steering toward a market economy.
In fact, improving the reliability and availability of information is a necessary step for the Southeast Asian country, the United Nations Development Programme (UNDP) said in a report on world investment this week.
The import quotas on motorcycle parts were akin to "putting on a non-tariff barrier," said Robert Glofcheski, chief resident economist at UNDP in Hanoi.
Harsher words came from the Japan Automobile Manufacturers Association, which said in a statement: "The quotas will also severely hinder further investment."
It estimated that Japan's motorcycle manufacturers could see a sales opportunity loss of $272.5 million in the second half of 2002.
Vietnam, one of the poorest countries in the world with an average per capita annual income of around $400, depends on international aid and has been actively seeking more foreign investment.
Total disbursements of foreign direct investment last year were about $2.3 billion. For the first seven months of 2002, Vietnam received 345 new projects with total registered capital of $594 million, a 48 percent drop in capital terms from the same period a year before.
TANGLED BUREAUCRACY
But even as it courts the outside world -- Vietnam has moved from a Soviet-style centrally planned economy in the late 1980s to a market-oriented one -- the country of 80 million is still enmeshed in murky bureaucracy and finding it tough to balance domestic and foreign interests.
In the case of the motorcycle spat -- the most serious to affect one of Vietnam's more open sectors -- Hanoi appears to be pushing foreign assemblers to buy more parts from domestic makers and to control a trade gap that ballooned to $1.7 billion in January to August from $122 million in the same period last year.
As if to underscore that point, the government on Friday said it will also impose a 100 percent import tax on foreign-assembled motorcycles from next year to protect domestic firms which will face stiffer competition when quotas on imports are lifted.
Official media said the government has decided to start the new import duty on January 1, 2003. The import of motorcycles fully assembled abroad is currently taxed at 60 percent.
The Japanese motorcycle makers -- who, until a flood of cheaper Chinese copycat models, controlled about 90 percent of Vietnam's bike market -- have cried foul. The quota has stirred a strong protest from the Japanese ambassador but there has been little sign of a reversal from Vietnam.
In early September, Vietnam said it would limit overall import quotas on motorcycle components to 1.5 million sets for 2002 versus 1.8 million in 2001. Of those, 600,000 sets are reserved for foreign-invested producers and the balance for roughly 50 local firms.
While foreign motorcycle manufacturers in Vietnam have faced higher taxes and increased import duties in the past, "this decision is like a death sentence", said Yuichi Bamba, director of JETRO in Hanoi, a Japanese government agency that promotes trade and investment.
More broadly, "I'm afraid that this decision may cause some potential investors to reconsider investing in Vietnam. It's very negative," he added.